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Defects of Agricultural Marketing in India


The term agricultural marketing is composed of two words -agriculture and marketing. Agriculture, in the broadest sense means activities aimed at the use of natural resources for human welfare, and marketing connotes a series of activities involved in moving the goods from the point of production to the point of consumption. Specification, the subject of agricultural marketing includes marketing functions, agencies, channels, efficiency and cost, price spread and market integration, producers surplus etc.

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The agricultural marketing system is a link between the farm and the non-farm sectors.


In India Agriculture was practiced formerly on a subsistence basis; the villages were self sufficient, people exchanged their goods, and services within the village on a barter basis. With the development of means of transport and storage facilities, agriculture has become commercial in character, the farmer grows those crops that fetch a better price.

Marketing of agricultural produce is considered as an integral part of agriculture, since an agriculturist is encouraged to make more investment and to increase production. Thus there is an increasing awareness that it is not enough to produce a crop or animal product; it must be marketed as well. The importance of marketing in agriculture is very well illustrated by saying, “that a good farmer has one eye on the plough and the other on the market”.

This is true when agriculture is mainly for subsistence; and now, even Indian agriculture is becoming commercialized. In these days of commercial agriculture, it will be more fit to say, “a good farmer has only his hands on the plough but the eyes on the market’ Since agriculture constitutes a major part of the economy, marketing of agricultural products also assumes considerable importance in our context. Agricultural marketing involves in its simplest form the buying and selling of agricultural produce.

This definition of agricultural marketing may be accepted in olden days, when the village economy was more or less self-sufficient, when the marketing of agricultural produce presented no difficulty, as the farmer sold his produce directly to the consumer on a cash or barter basis. However, in modem times, marketing of agricultural produce is different from that of olden days. In modem marketing, agricultural produce has to undergo a series of transfers or exchanges from one hand to another before it finally reaches the consumer.

The National Commission on Agriculture, defined agricultural marketing as a process which starts with a decision to produce a saleable farm commodity and it involves all aspects of market structure of system, both functional and institutional, based on technical and economic considerations and includes pre and post- harvest operations, assembling, grading, storage, transportation and distribution. The Indian council of Agricultural Research defined involvement of three important functions, namely (a) assembling (concentration) (b) preparation for consumption (processing) and (c) distribution.

In short, all the activities like transportation processing, storage, grading are including in the agriculture marketing. These activities are inadequate in the economy of every country.

Importance and Objectives of Agriculture Marketing

The farmer has realized the importance of adopting new techniques of production and is making efforts for more income and higher standards of living. As a consequence, the cropping pattern is no longer dictated by what he needs for his own personal consumption but what is responsive to the market in terms of prices received by him.

While the trade is very organised the farmers are not Farmer is not conversant with the complexities of the marketing system which is becoming more and more complicated. The cultivator is handicapped by several disabilities as a seller. He sells his produce at an unfavorable place, time and price. The objectives of an efficient marketing system are:

  1. to enable the primary producers to get the best possible returns,
  2. to provide facilities for lifting all produce, the farmers are willing, to sell at an incentive price,
  3. to reduce the price difference between the primary producer and ultimate consumer, and . to make available all products of farm origin to consumers at reasonable price without impairing on the quality of the produce.

Facilities Needed for Agricultural Marketing

In order to have best advantage in marketing of his agricultural produce the farmer should enjoy certain basic facilities.

  1. He should have proper facilities for storing his goods.
  2. He should have holding capacity, in the sense, that he should be able to wait for times when he could get better prices for his produce and not dispose of his stocks immediately after the harvest when the prices are very low.
  3. He should have adequate and cheap transport facilities which could enable him to take his surplus produce to the mandi rather than dispose it of in the village itself to the village money-lender-cum-merchant at low prices.
  4. He should have clear information regarding the market conditions as well as about the ruling prices, otherwise may be cheated. There should be organized and regulated markets where the farmer will not be cheated by the “dalals” and “arhatiyas”.
  5. The number of intermediaries should be as small as possible, so that the middleman’s profits are reduced.

This increases! the returns to the farmers. The existing systems of agricultural marketing in India are as briefly described here.

  1. Sale to moneylenders and traders. A considerable part of the total produce is sold by the farmers to the village traders and moneylenders. According to an estimate 85% of wheat, 75% of oil seeds in U. P. , 90% of jute in West Bengal and 60% of wheat, 70% of oil seeds and 35% of cotton in Punjab are sold by the farmers in the villages themselves. Often the money lenders act as a commission agent of the wholesale trader.
  2. Hats and shanties. Hats are village markets often held once or twice a week, while shanties are also village markets held at longer intervals or on special occasions. The agents of the wholesale merchants, operating in different mandies also visit these markets. The area covered by a “hat” usually varies from 5 to 10 miles. Most of “hats” are very poorly equipped, are uncovered and lack storage, drainage, and other facilities. It is important to observe that only small and marginal farmers sell their produce in such markets. The big farmers with large surplus go to the larger wholesale markets.
  3. Mandies or wholesale markets. One wholesale market often serves a number of villages and is generally located in a city. In such mandies, business is carried on by arhatiyas. The farmers sell their produce to these arhatiyas with the help of brokers, who are generally the agents of arhatiyas. Because of the malpractices of these middlemen, problems of transporting the produce from villages to mandies, the small and marginal farmers are hesitant of coming to these mandies. The arhatiyas of these mandies sell off the produce to the retail merchants.

However, paddy, cotton and oilseeds are sold off to the mills for processing. The marketing system for sugarcane is different. The farmers sell their produce directly to the sugar mills. Defects of agricultural marketing in India Indian system of agricultural marketing suffers from a number of defects. As a consequence, the Indian farmer is deprived ‘of a fair price for his produce. The main defects of the agricultural marketing system are discussed here. Improper warehouses. There is an absence of proper ware housing facilities in the villages.

Therefore, the farmer is compelled to store his products in pits, mud-vessels, “Kutcha” storehouses, etc. These unscientific methods of storing lead to considerable wastage.


  1. 5% of the produce gets rotten and becomes unfit for human consumption. Due to this reason supply in the village market increases substantially and the farmers are not able to get a fair price for their produce. The setting up of Central Warehousing Corporation and State Warehousing Corporation has improved the situation to some extent
  2. Lack of grading and standardization. Different varieties of agricultural produce are not graded properly. The practice usually prevalent is the one known as “dara” sales wherein heap of all qualities of produce are sold in one common lot Thus the farmer producing better qualities is not assured of a better price. Hence there is no incentive to use better seeds and produce better varieties.
  3. Inadequate transport facilities. Transport facilities are highly inadequate in India. Only a small number of villages are joined by railways and pucca roads to mandies. Produce has to be carried on slow moving transport vehicles like bullock carts. Obviously such means of transport cannot be used to carry produce to far-off places and the farmer has to dump his produce in nearby markets even if the price obtained in these markets is considerably low. This is even more true with perishable commodities.
  4. Presence of a large number of middlemen. The chain of middlemen in the agricultural marketing is so large that the share of farmers is reduced substantially. For instance, a study of D. D. Sidhan revealed, that farmers obtain only about 53% of the price of rice, 31% being the share of middle men (the remaining 16% being the marketing cost). In the case of vegetables and fruits the share was even less, 39% in the former case and 34% in the latter. The share of middle- men in the case of vegetables was 29. 5% and in the case of fruits was 46. 5%. Some of the intermediaries in the agricultural marketing system are -village traders, Kutcha arhatiyas, pucca arhatiyas, brokers, wholesalers, retailers, money lenders, etc.
  5. Malpractices in unregulated markets. Even now the number of unregulated markets in the country is substantially large. Arhatiyas and brokers, taking advantage of the ignorance, and illiteracy of the farmers, use unfair means to cheat them. The farmers are required to pay arhat (pledging charge) to the arhatiyas, “tulaii” (weight charge) for weighing the produce, “palledari” to unload the bullock-carts and for doing other miscellaneous types of allied works, “garda” for impurities in the produce, and a number of other undefined and unspecified charges. Another malpractice in the mandies relates to the use of wrong weights and measures in the regulated markets. Wrong weights continue to be used in some unregulated markets with the object of cheating the farmers.
  6. Inadequate market information. It is often not possible for the farmers to obtain information on exact market prices in different markets. So, they accept, whatever price the traders offer to them. With a view to tackle this problem the government is using the radio and television media to broadcast market prices regularly. The news papers also keep the farmers posted with the latest changes in prices. however the price quotations are sometimes not reliable and sometimes have a great time-lag. The trader generally offers less than the price quoted by the government news media.
  7. Inadequate credit facilities. Indian farmer, being poor, tries to sell off the produce immediately after the crop is harvested though prices at that time are very low. The safeguard of the farmer from such “forced sales” is to provide him credit so that he can wait for better times and better prices. Since such credit facilities are not available, the farmers are forced to take loans from money lenders, while agreeing to pledge their produce to them at less than market prices. The co-operative marketing societies have generally catered to the needs of the large farmers and the small farmers are left at the mercy of the money lenders. Thus it is not possible to view the present agricultural marketing system in India in isolation of (and separated from) the land relations. The regulation of markets broadcasting of prices by All India Radio, improvements in transport system, etc., have undoubtedly benefited the capitalist farmers, and they are now in a better position to obtain favourable prices for their “market produce” but the above mentioned changes have not benefited the small and marginal farmers to any great extent.
  8. Poor Quality of Product. Farmer is not using the improved seeds and fertilizers so quality of production is very poor and its prices are low in the market.
  9. Problems of Produce Collection. The collection of produce from small farmers is very expensive and a difficult process. It is a great problem for the efficient marketing.
  10. Lack of standard weights and measures. Sometimes weight and measures are not same. So a farmer suffers a loss at the time of buying selling of his product.


Government of India has adopted a number of measures to improve agricultural marketing, the important ones being – establishment of regulated markets, construction of warehouses, provision for grading, and standarization of produce, standarisation of weight and measures, daily broadcasting of market prices of agricultural crops on All India Radio, improvement of transport facilities, etc.

  1. Marketing surveys. In the first place the government has undertaken marketing surveys of various goods and has published these surveys. These surveys have brought out the various problems connected with the marketing of goods and have made suggestions for their removal.
  2. Improved Transport Facilities. The government should increase the road facilities and rural areas should be linked with the markets. It will enable the farmer to sell his product in the market directly in the hands of consumers.
  3. Increase in the Credit Facilities. The government should increase the credit facilities to the small farmers. No doubt all the commercial banks are providing this facility to the farmers but still it is not sufficient.
  4. Increase in Storage. Facility The government should provide loan to the framer for storage facilities. The government should also construct the stores to keep the stocks of various goods.
  5. Market Reforms. The government should improve the market system in the country. Market committee should be reorganized. Markets inspectors should check the prices of agricultural products. The strict laws should be introduced.
  6. New Markets. The government should build the new markets near the producing centers. It will enable the farmer to get proper reward.
  7. Cold Storage. This is an important part of organized markets. These are very useful for the perishable goods like fruits and vegetable. The government should expand the scope of cold storage.
  8. Market Information. Market demand and supply condition can be provided to the framers through radio, T. V and newspaper. The government should also pay special attention to this side.
  9. Grading of Product. There are various agencies which are busy in grading agricultural product. There is a need to expand these organizations for effective of marketing system,
  10. Government purchases and fixation of support prices

In addition to the measures mentioned above, the Government also announces minimum support price for various agricultural commodities from time to time in a bid to ensure fair returns to the farmers. These prices are fixed in accordance with the recommendations of the Agricultural, Price Commission. If the prices start falling below the declared level (say, as a result of glut in the market), the Government agencies like the Food Corporation of India intervene in the market to make direct purchase from the farmers at the support prices. These purchases are sold off by the Government at reasonable price through the public distribution system

Ideal Marketing System

The ideal marketing system is one that maximizes the long run welfare of society. To do this, it must be physically efficient, otherwise the same output could be produced with fewer resources, and it must be electively efficient, otherwise a change in allocation could increase the total welfare and where income distribution is not a consideration. For maximum physical efficiency, such basic physical functions as transportation, storage, and processing should be carried on in such a way so as to achieve the highest output per unit of cost incurred on them.

Similarly an ideal marketing system must allocate agricultural products in time, space and form to intermediaries and consumers in such proportions and at such prices as to ensure that no other allocation would make consumers better off. To achieve this condition, prices throughout the marketing system must be efficient and must at the same time be equal to the marginal costs of production and marginal consumer utility. The following characteristics should exist in a good marketing system.

  1. There should not be any government interference in free and market transactions. The method of intervention include, restrictions on food grain movements, restrictions on the quantity to be processed, or on the construction of processing plant, price supports, rationing, price ceiling, entry of persons in the trade, etc. When these conditions are violated, the inefficiency in the market system creeps in and commodities pass into the black market. They are not then easily available at the fair prices.
  2. The marketing system should operate on the basis of the independent, but systematic and orderly, decisions of the millions of the individual consumer and producers whose lives are affected by it.
  3. The marketing system should be capable of developing into an intricate and far-flung marketing systems in view of the rapid development of the urban industrial economy.
  4. The marketing system should bring demand and supply together and should establish an equilibrium between the two.


A good marketing system is one, where the farmer is assured of a fair price for his produce and this can happen only when the following conditions are obtained.

  1. The number of intermediaries between the farmer and the consumer should be small;
  2. The farmer has proper storing facilities so that he is not compelled to indulge in distress sales,
  3. Efficient transport facilities are available,
  4. The malpractices of middlemen are regulated,
  5. Farmers are freed from the clutches of village moneylenders and
  6. Regular market information is provided to the farmer.

The two institutions: co-operative marketing societies and regulated markets, together can assure, the presence of all these conditions. Accordingly if cooperative marketing societies are developed on the lines indicated above (along with regulated markets), the Indian agricultural marketing system can be considerably improved.

Cite this Page

Defects of Agriculture. (2016, Dec 22). Retrieved from

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